A New Era for the Dow Jones Industrial Average

Today signifies a fresh dawn for the Dow Jones Industrial Average. With the inclusion of online giant Amazon and the exit of pharmacy chain Walgreens Boots Alliance, the 128-year-old index undergoes only its 52nd alteration. The alteration runs deep, with Walmart’s (NYSE: WMT) 3-for-1 stock split shaping the new divisor, a crucial element translating share price into Dow points.

Stock splits, mere optical illusions, allow companies to adjust both share price and outstanding share count by the same measure, leaving market cap and operational performance untouched. Forward splits render shares more nominally affordable, whereas reverse splits elevate a company’s share price to preserve its spot on a major exchange.

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Walmart Dives Into Stock Split Territory

Today, on this Monday, February 26th, Walmart has put into motion its 3-for-1 forward stock split, previously announced on January 30th. CEO Doug McMillon elucidated the split’s purpose – an endeavor to engage employees in Walmart’s Associate Stock Purchase Plan. McMillon stated,

Sam Walton believed it was vital to maintain our share price at an accessible range for all our associates to purchase whole shares. Given our trajectory and future visions, we deemed it apt to split the stock and encourage staff involvement ahead.

Walmart’s boon from an above-average inflation rate over the past couple of years accentuates its prowess. The retail giant’s ability to amass goods in bulk at lower costs surpasses what smaller establishments can offer. With price-conscious consumers on the prowl for deals, Walmart’s appeal remains resolute.

Joining the elite league of fewer than a dozen notable brands to initiate a forward-stock split since mid-2021, Walmart now dons this badge proudly. However, it won’t be the final prominent or soaring public entity to opt for a split. These three overachievers appear ripe to grace the stock-split domain soon.

Image source: Getty Images.

Meta Platforms: Next in Line for a Stock Split?

The most compelling contender to follow in Walmart’s footsteps towards a stock split after the retail giant is social media mogul Meta Platforms (NASDAQ: META). Meta has not engaged in a split since its 2012 public debut, with its share price nearing $490 merely a fortnight ago.

Meta’s triumph hinges on a trifecta of factors. Firstly, it boasts unparalleled dominance in the social media sphere as the parent company of globally frequented platforms like Facebook, Instagram, WhatsApp, Facebook Messenger, and Threads. This expansive reach, nearly 4 billion monthly active users, makes Meta a magnet for advertisers, exuding potent ad-pricing prowess.

Furthermore, Meta’s allure extends beyond advertising, delving into augmented reality, the metaverse, and diverse AI applications. Although ads contribute nearly 98% to Meta’s revenue pool, the outlook for metaverse and AI growth is exhilarating.

Lastly, Meta’s robust financial foundation, closing 2023 with $65.4 billion in cash equivalents, enables bold strides in innovation, setting it apart from peers in the tech ecosystem.

Chipotle Mexican Grill: Cooking Up a Stock Split?

The second stock shining with promise for a solo stock split is the fast-casual dining expert, Chipotle Mexican Grill (NYSE: CMG). Having catapulted from its $22 IPO price in 2006 to a staggering $2,725 per share recently, Chipotle’s lofty share value poses a hurdle for fractional-share purchases.

Chipotle’s success mantra revolves around quality fare and innovativeness. Focusing on locally sourced ingredients and ethical meat sourcing, the company finds that consumers willingly pay more for healthier food options, steering clear of inflation woes.

The company’s streamlined menu benefits efficiency and enhances new product launches’ impact, underpinning sustained double-digit bottom-line growth.

Broadcom: A Stock Split Contender

Completing the trio, semiconductor giant Broadcom (NASDAQ: AVGO) emerges as a strong candidate to mirror Walmart’s trajectory into the stock-split expanse. Despite Avago’s acquisition of Broadcom and subsequent nomenclature retention in 2016, the original Broadcom underwent three splits. With share prices soaring to $1,295 earlier this month, Broadcom’s connection to the AI revolution has been pivotal to its superlative market performance.

In early 2023, Broadcom showcased prowess by deploying Jericho3-AI, targeting connectivity expansion to 32,000 graphics processing units in high-compute data.